Commercial Real Estate Analysis and Investments
These chapters describes the two major types of markets relevant to the analysis of commercial property: the space market and the asset market. The space market is the more fundamental of the two in the sense that it determines the cash flows property can generate, and these cash flows underlie any value the property asset can have. However, the asset market is of equal importance because it determines the valuation of property assets, and this in turn governs the flow of financial capital to real estate. Also, the asset market is most directly relevant to the analysis of investment in commercial property, which is the main subject of this book. In introducing these two real estate markets, this chapter has also presented a few of the most basic analytical tools and measures that are widely used in real estate investment practice, including such concepts as the kinked space market supply curve and the cap rate shortcut measure of real estate pricing in the asset market.